Mårten Blix, Digitalization, Immigration and the Welfare State

While this book might look like a niche research project – it studies the impact of immigration and digitalisation on Sweden’s society and economy – it has an importance well beyond that. The ‘Swedish Model’ – in which collective bargaining in the labour market still has a substantial role, well-funded public services remain the norm, and low inequality accompanies high economic growth – might be unusual: but the conclusions that the author draws about the impacts of immigration and digitalisation on the Swedish Model are far from irrelevant to other developed countries. Digitalisation causes job and wage polarization, creating more highly skilled employment, more low-skill employment, and less skilled employment: and it is the low-skill employment that will offer employment opportunities to the relatively less well educated immigrants, whereas the current preponderance of skilled jobs in Sweden is excluding them from employment. (The UK, having already dispensed with much of its skilled employment, is further along the road towards the polarisation that Blix predicts for Sweden.)

The challenges that Blix foresees in his introductory chapter are these: rising inequality and job polarization; tax base erosion; the costs associated with aging populations; immigrants less able to access welfare state institutions ( – more of a problem in Sweden than in the UK, in which social insurance is now largely irrelevant); the rigidity and exclusionary nature of collective bargaining ( – again, not such a problem in the UK, where collective bargaining is in its death-throes). The table on page 13 that shows features of the welfare state, threats to those features, and the economic and social forces driving those threats, is particularly helpful.

The following three chapters study the history of the Swedish model, and the changes that digitalisation are causing in Sweden’s economy and employment market. The conclusions drawn are generally applicable to other countries, but the detail would need adaptation: whereas the conclusions drawn in chapter 5, on the weakening of a tax base located largely in paid employment, are applicable both in general and in detail. The platform-based labour market, represented by companies such as Uber and AirBnB, allocates resources more efficiently than traditional labour markets, which means that income tax revenues fall: although an opposite effect is now emerging in that some services that were previously unprofitable are now economically viable and so contributing to the tax base. Chapter 6 identifies a lack of digital skills among a large proportion of the population as an important driver of inequality, and this, along with increasing longevity, suggest that life-long learning as the only viable response.

The final chapter lists the challenges facing the welfare state in Sweden: a labour market that immigrants find it difficult to access; labour market polarization; the exclusionary nature of collective bargaining; the rising cost of the welfare state; an eroding tax base; increases in income inequality; and an increasingly platform-based employment market. Some of these challenges, and especially the last one, might turn out to be opportunities; and some have obvious solutions: lifelong learning would help to unpolarise the employment market. The author also discusses a Universal Basic Income, recognising that it would be simple to administer, could eradicate poverty, would enable workers to invest in themselves, and would enhance individual freedom. He objects to the proposal on the basis that it would reduce incentives for work and would be too costly. This is because he assumes that a UBI would provide enough to live on, which is not a necessary element of the definition; because he has not studied the costings research undertaken in the UK, which shows that it would be possible to establish a UBI without requiring additional public funds; and because he has not recognised that lower marginal deduction rates would incentivise employment relative to a mainly means-tested system. Blix suggests that a UBI is ‘not just a costly reform; it is off the charts and implies an entirely different political economy than the current system’ (p. 161). That is one way of looking at it. The other is to regard it as an adaptation of the current system appropriate to economic, social, and labour market change.

Blix concludes with some proposed changes to the Swedish Model, most of which would be appropriate to other countries.

While the treatment of a Citizen’s Income is inadequate, this is a most useful book, and particularly useful is its focus on Sweden. This makes the reader do some work: ‘If the UK is different from Sweden in relation to this aspect of the argument, how is it different, and therefore how should we adapt his analysis and his prescriptions?’ What we now require is for Blix or someone else to write a similar book based on the UK, with a rather more thorough exploration of the potential of a Citizen’s Income.